CHICAGO, April 23 (Xinhua) -- CBOT agricultural futures closed mixed amid uncertainty in the week.
The United States reported a March inflation rate of 8.5 percent, the highest since 1981. The Federal Reserve is expected to raise rates by 0.5 percent in its early May meeting and may even go as high as 0.75 percent.
Chicago-based research company AgResource remains bullish on agricultural futures but warns against chasing rallies before the overbought technical conditions are corrected.
Corn futures ended mixed this week, with old crops gaining on new. Falling South America cash prices and improving Midwest weather were cited for the price drop late in the week.
AgResource notes that seasonally spot futures tend to peak in May as importer demand transitions to the Southern Hemisphere as market focus quickly shifts to new crop yield potentials. Increased volatility must be expected to move forward as weather adds to the geopolitical uncertainty tied to the ongoing Russia-Ukraine conflict.
Yet a lasting bearish trend cannot be established until the market confirms favorable summer weather patterns in the United States, the Black Sea and Europe. The market must also have confirmation that South American seedings will expand by 5 percent in 2022-2023 at minimum. Global feed supply issues are real, and the likelihood that Ukrainian exports will resume in bulk in 2022 is low.
Russia is reportedly targeting all of Ukraine's Black Sea ports which will inflict real structural damage on Ukraine's ability to export grain or agricultural production in bulk.
The long-term outlook remains bullish as the tolerance for yield loss this year is zero. Additionally, South America's surplus will be exhausted much earlier than usual amid yield loss in Brazil and Argentina. July corn's range is pegged at 7.75 to 8.50 U.S. dollars, and December contracts should hold a break at 7.00 to 7.15 dollars. Corn remains bullish on any 20 to 30 cent setbacks.
U.S. wheat futures ended widely mixed as soft red winter crop ratings are elevated, but North American high protein production will be further threatened by weather into May.
Drought across the South Plains will be intensified this weekend. Near zero rain is forecast across the South and West Plains into May 5. Constant freezing temperatures and additional soaking precipitation will keep spring wheat seeding absent across the North Plains for another 10 days. The spring crop can be seeded quickly, but the issue in 2022 is the complete lack of tolerance for production and yield losses.
Otherwise, seasonal price trends worldwide will turn more neutral in late spring as global importer demand slows and exporter harvests loom in the background. AgResource suggests that, similar to recent years, the intensity of any harvest-based weakness will be modest. Due to weather losses across North Africa and the Mideast, global wheat demand is rising. And Russian wheat exports will be cut in half as vessel insurance is prohibitively expensive. Ukrainian exports will be minimal.
AgResource maintains that new highs may occur by autumn if the conflict in Ukraine fails to end. U.S. hard red winter wheat yield and crop potential are in freefall on the dire drought.
Soybean futures broke out to the upside last week, gaining 34 cents to mark the highest weekly close since August 2012. Support throughout the week came from technical buying and bullish fundamental demand indications.
The National Oilseed Processors Association reported a record large March soybean crush rate of 182 million bushels, and the news offered strong early-week support. Additionally, the U.S. Department of Agriculture made a slew of export sales announcements during the week, while the export sales report showed a record large amount of outstanding old crop and new crop soybean sales. The pace of Brazilian soybean exports appears to be slowing and has potentially forged a seasonal top.
Fundamental trends are bullish, with U.S. cash crush margins at a historic three dollars per bushels. AgResource maintains a bullish outlook. Support in nearby soybeans is offered on corrections to 16.25-16.50 dollars for July contracts, while November contracts have support at 14.60-14.90 dollars.
A summer weather problem would drive CBOT prices to record highs above 18.00 dollars. The market risk is to the upside until a record large U.S. soybean yield can be confirmed. ■